John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems. Promoted by John Redwood 152 Grosvenor Road SW1V 3JL

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Why should you believe anything the Euro group says about Greece?

They told us if the Greek people voted against the final proposals of the Euro area they would have to leave the Euro.

The Greeks voted No, so they were invited to new talks to stay in.

We read they would have one last go at sorting it out at a special meeting yesterday.

That failed.

So now the Greeks have been invited to table more proposals by Friday, with a meeting for the heads of government of the whole EU scheduled for Sunday to endorse a deal or agree to no deal and its unspecified consequences for Greece’s Euro and EU membership.

Meanwhile the unpleasant threats to Greece continue, with no proper support for Greek  banks and with  talk of bankruptcy and Euro exit.

This is not a sensible, friendly or effective way to run a single currency. Those who want the Euro need to support all parts of the zone and have confidence in its member states and banks. To its critics the Euro is now doing obvious economic damage to Greece and more widely, and is causing major tensions between European countries.

Preparing for the Paris climate change conference

This December the UN seeks again to reach a global agreement to cut carbon dioxide output. The new agreement will take the form of a legally enforceable protocol and legal instrument attached to past agreements. It will come into force in 2020. The advocates wish to limit the earth to a 2 degree temperature rise, and believe that if the world cuts human generated carbon dioxide emissions by enough this precision in temperature control can be achieved. There is little comment on the other variables which might have an impact on the weather and climate in 2050 and 2100.

We now know the offers of the three main players. China, the world’s largest source of human CO2 emissions (25% of world total) has indicated that it should reach peak output of carbon dioxide by 2030. In the meantime it will build up renewable electricity generating capacity to limit the rise in carbon output it plans.  The USA (11% of world total) under Mr Obama wishes to make a   contribution, and has offered to cut its emissions by 28% in 2025 compared to a 2005 base level.  The EU (9% of world total) acting on behalf of all member states is enthusiastic about the process. It has offered a “binding, economy wide, domestic greenhouse gas emissions reduction target of at least 40% by 2030”. This is compared to a 1990 base.

The fact that China’s emissions will grow mean that advocates of this policy will be disappointed by the offers so far made collectively by the main creators of greenhouse gases. Once again the response of the world is asymmetric, with the EU offering the biggest cuts. This will continue to expose the EU to the need to substitute dearer energy for cheaper energy, and will limit EU competitiveness. Whilst markets are understandably concentrating on the tribulations of the Euro, the EU’s climate policy is also going to have quite an impact on EU costs, and divert  more industry out of the EU altogether. At least this process will cut the EU’s carbon footprint but it will also  boost the footprint of those places that sell us the industrial products that become displaced.

 

The future of the BBC

BBC reform is on the agenda. The appointment of Mr Whittingdale  as Culture Secretary and related briefing indicates change is in the air. He will preside over the licence review, and has been a past critic of the BBC poll tax or licence fee.

Some wish to use this review as an opportunity to re open the issue of alleged BBC bias. I do not think this is a good idea. The issue of bias requires robust democratic exchange, with more than one party or interest group thinking they are badly done by. These are  matters to be fought over within any given financial and governance framework for broadcasting, but should not dictate those frameworks.

I do agree with those Conservative and UKIP critics who think the BBC has a strong pro EU Guardian style bias. Many interviewers repeat the 3 million jobs at risk lie about EU& membership and still claim not to have heard its simple refutations. Most interviewers talking to business people invite them to say they wish us to stay in the EU in any interview, yet people against EU membership  talking on other subjects are not asked for their view on the EU. When discussing issues like fuel poverty and dear energy the BBC seems to go out of its way to avoid mentioning that dear fuel is an EU policy. These are matters for immediate review with the BBC but not a proper part of any decisions on its future. The BBC after all belongs to all of us, including pro EU voters.

The main  issues at stake in the licence review have been partially dealt with by the surprise announcement yesterday to the Commons of a new financial settlement. The BC loses the broadband levy, but takes over responsibility for free tv licences for the over 75s. In return it gains indexation of a confirmed licence fee.

This still leaves important issues like removing the criminal offence from non payment  of the licence fee, the definition of public service and the question of how the BBC is allowed to compete with other media outlets using tv tax revenues.

The European Central Bank should tell us when and how it will support Greek banks

It is unacceptable for one of the leading Central banks of the world to fail to tell people on what basis it will support Greek banks and get them open for business again.
It is the job of the ECB to supply Euros to Greek banks when people want to withdraw their money. It is their duty to allow external settlement of accounts from Greece to the rest of the zone and beyond. Greek business with money needs to pay foreign suppliers. If Greek banks are solvent as the ECB has always said they are, they must supply the cash. If a bank in the zone becomes insolvent, then the ECB must trigger its recapitalisation. Playing politics with the livelihoods of Greeks and undermining Greek businesses by failing to allow transactions is doing damage to the Eurozone as a whole as well as to Greece itself.

Oxi, Oxi, Oxi – democracy beats the Euro for now

I hold this truth to be self evident. People are happier if they are self governing.
The choice for the Greek people was a simple one. Did they wish to sign up to another period of the same policies that delivered a cut of one quarter in their incomes and mass unemployment, especially for their young people, or did they wish to try something different?
We now know the Greeks by a large margin voted for their democracy. They voted for change. They voted against the policies a German led Europe has imposed on them. And yes, it was a vote against German influence, as the explicit posters of the campaign with pictures of the German Finance Minister and unflattering words made clear.
I think all should respect the strong view of the Greek people. If the Euro area wishes to keep Greece in the Euro it has to move swiftly to help. If it wants them out, it needs to tell us urgently how it can be done sensibly with least damage.
Those who still have something to lose, particularly those with jobs from the EU, may have voted for more of the same. Those who have already lost probably voted for change. Those who are optimists probably voted for something different, whilst some pessimists accepted the German led EU’s strictures. Those who believe in Greek democracy voted for their government and those who believe in the EU scheme voted for the deal which may be back on offer.
To some in Greece it was a vote for the dignity to disagree with The Euro bosses. For others it was a vote to conform, to show they are trying to be good Europeans.
This is a seminal moment for the whole EU/Euro project. As Greece votes No the EU has to rethink its approach to national democracies. Other nations will want and need the ability to change EU/Euro policies they do not like.
It is not a pleasant sight watching the group of Euro area Ministers and their Central bank gradually throttling the Greek economy by refusing it the cash it needs through the commercial banks. If these are solvent banks they should be sent the money they need. If a bank is no longer solvent it should be recapitalised under the agreed procedure. Any advanced economy needs a fully operational banking system. It is a prime duty of sovereign government to maintain a freely traded currency that allows all legal transactions.Why doesn’t the Eurozone do that?
If today the European Central Bank does not re-open the facilities for the Greek banks we will witness the extraordinary sight of the European Central Bank refusing to help damaged banks within its own zone, and refusing to behave as normal central banks as lender of last resort and provider of liquidity to commercial banks under its supervision. This may force the Greek state to issue its own money to pay bills and to re-open the banks.If the Euro area refuses early and urgent talks with Greece then it makes crisis more likely. It should also lead other members to ask what kind of a common currency is it, if people with deposits in banks in the zone cannot get their own money out, and if businesses in Greece with money are not able to pay their bills with other parts of the zone.

Are the Euro bosses going to throw Greece out of the Euro as they said they would ?

Before the Greek referendum the consistent message from the European Commission, the Euro group of ministers, and from the large Euro country governments was the same. The referendum was not about whether Greece should accept the last terms from the Euro group and EU or whether it should reject them. The referendum they said, was about whether Greece wanted to stay in the Euro or not.
Germany’s Vice Chancellor said on the record that a No vote was a vote “against remaining in the Euro”. The President of France said the vote was about “whether the Greeks want to stay in the Eurozone.” Signor Renzi of Italy said the vote was about the “Euro versus the drachma”. As they knew the Greek government and people wanted to stay in the Euro come what may and were not about to ask to leave, they were clearly saying they would drive Greece out of the currency if she voted No.
So how are they going to bring this about? Will they do it by a sensible agreement, keeping Greece’s banks going in the meantime whilst Greece sets up her own currency arrangements? Or are they going to do it the nasty way, by continuing to refuse the Greek banks access to more cash, in an effort to bring the Greek banks down in a hurry and force the pace of establishing a new Greek currency?
Or were these words all foolish hot air? Will the Euro area now meekly pay up, send Greece the money it needs to keep going, and sit down again at the negotiating table to try to come up with another compromise which is better for Greece than the last one on offer? If they do that, will they this time try and find a lasting solution, instead of more extend and pretend credit that does not tackle the underlying weakness of the Greek economy?
Which ever way, the credibility of the Euro bosses is gravely compromised by this dreadful situation they have helped create. If they decide to co-operate, lend to Greek banks enough money, help the Greek state meet its debts, and discuss changes of economic policy to try to get the Greek economy growing again, they will have to eat all the words they have spoken in haste in the last week. They send exactly the signal they wished to avoid, that if a country gets into a big enough mess they will be bailed out by the taxpayers of other states of the zone. If they continue to dig in and refuse to support Greek banks they may well drive Greece out of the Euro, after doing yet more damaged to the Greek economy. It is time they rose to their responsibilities. It is time they understood how democracy works. It is time they realised they and the IMF have lent too much already on the wrong terms, and have now to find a way out for themselves and for Greece.

How should we define poverty?

We all agree we want to abolish poverty. The arguments about how to tackle poverty and low incomes in UK politics are not about the aim. All political parties and all sensible politicians want to wipe out poverty, want more jobs and better pay. Our arguments are about how you make that happen.

This week the government has ventured into the difficult territory of trying to define poverty. The World Bank says you are poor if you have less than $2 a day to spend, as that means you cannot afford the basics of food and shelter. They go for an absolute standard of poverty, where to be poor you go hungry or have no suitable home. In the UK most of the organisations who talk about poverty prefer to use a relative measure, so our definition of poverty is of a much higher basic required income so that people can assume a standard of food, clothing and housing related to the average that people in a rich country like the UK enjoy.

As one of the leading anti poverty charities puts it ” When we talk about poverty in the UK today we rarely mean malnutrition or the levels of squalor of previous centuries or even the hardships of the 1930s before the advent of the Welfare state. It is a relative concept”

Labour in office defined child poverty as living in a household with an income less than 60% of the UK average. This means in a recession as in 2007-9 when average incomes fall you can have the paradoxical effect that child poverty falls, though children in low income households are not themselves better off. Similarly, if we enter a period of faster income growth then children in lower income households can be better off but there could be more in poverty as defined if inequality rises as incomes rise.

The government is looking at a range of measures including poor educational attainment, long term worklessness in the household, drug and drink dependency and family breakdown to get to the bottom of which children are at risk or getting a bad deal. Do you agree with this approach?

Euro 50 billion more for Greece

The IMF has apparently come to two conclusions on Greece which the rest of the Euro area does not wish to admit. First, Greece will not be able to pay back all that she owes. Second, she needs another Euro 50 billion. Why then did the IMF lend Greece so much before with the pretence that it would work?
If Greece is to stay in the Eurozone she will need Euro 50 billion or more, to have enough cash for her banks to distribute and enough money for her government to pay its bills. In a normal currency zone this money would be sent to the poorer part of the zone and much of it would be grant, not loan. A city or county in the UK with low incomes and high unemployment does not have to borrow from the rest of the UK, but receives central cash to pay welfare benefits, pensions and local authority costs by way of grant.
If Germany wants to carry on with her currency zone then she has to accept that German taxpayers – and the taxpayers of other rich countries – have to fork out to pay for Greece. Greece, for its part, has to accept that the Eurozone can then settle its budgets and interfere in its government decisions.
It is deeply damaging to the Greek economy and people to go on pretending that Greece can pay her way locked into the Euro, and to pretend the European institutions can get all their money back with the agreed interest. After seven years of agreed programmes for reform and all that borrowing Greece is no nearer today to being able to repay than when it all started. So the rest of the zone must either pay up or tell Greece to leave. Outside the Euro Greece will become more competitive immediately and better able to pay her way. Her borrowing will then be limited by the market to levels she can afford.
the zone is cruel and unrealistic. It needs to tell Greece to leave, or it needs to pay up and take social responsibility for the unemployment and severe cuts it has helped create.

What a scorcher?

On Wednesday we were told by various media outlets that the 36 degrees recorded in some parts of the UK was a new record.

That’s strange. The Met Office’s own website shows a high of 38.5 degrees in 2003. It’s still nothing like the summer of 1976 when the temperature from 23 June to 7th July was always over 32 degrees somewhere in the UK – now that was a hot summer.

This week is not the first time rails have buckled from heat, nor the first time we have hit 36 degrees. I seem to remember it used to be thought very hot if we hit 100 degrees Fahrenheit, which is more than 36 Celsius.

Countering terrorism

Yesterday in the Commons we debated defence matters. The Secretary of State explained the actions UK aircraft are taking in Iraq, at the request of the Iraqi government. He raised the issue of whether the new Parliament would reconsider the position in Syria, and allow air strikes by UK aircraft there as well. Several of us advised against.

I share his revulsion at the actions of extreme groups in various parts of the Middle East. We all feel we want to take action to make an attack like that in Tunisia last week less likely. However, a mature well armed state needs to think carefully before committing to military action. It should always ask Is this a war we can win? If we win this war will there be a satisfactory peace that is better than the current situation? Can we win the war without doing unacceptable levels of damage to the place concerned, and without excessive loss of life, especially for non combatants?

The UK has had to counter domestic terrorist threats. The UK always sought to respond to terrorism at home under the rule of law. The authorities tried to locate terrorists, assemble evidence and prosecute them as criminals. This remains our approach to terrorists in the UK linked to Middle Eastern fanatical groups. In the Irish troubles the terrorists sought special political status. There were endless arguments about the use of force for self defence by the UK authorities and about the legal processes and the detention of prisoners.

To end the terrorist troubles in Northern Ireland successive UK governments, both Conservative and Labour, came to the conclusion that they needed to undertake a political process, engaging terrorist organisations in talks and finding a democratic answer to the conflicts within a troubled community. No political party in the UK ever advocated pursuing a war on terrorist organisations,authorising shooting or bombing by the state.

I raised the question of how the UK can contribute to a negotiated settlement in Iraq or Syria, and drew attention to the contrast between treating terrorism as a serious policing matter, and treating it as a war to be fought despite the terrorists being embedded in civilian communities of people who are not themselves killing others. The Minister reminded me that in the case of Iraq we have the request of the civilian authority and operate under that legal cover. In Syria we do not wish to be friends of the Assad regime, so there is no similar legal base for intervening in Syrian territory. The Minister implied that any intervention would be as a result of extending the remit from Iraq, chasing terrorists over the border who have been operating in Iraq itself.

I understand the frustration of many that we have not so far been able to stop some of the advances of terrorists in Iraq and Syria, though nor have we in Nigeria and other Middle Eastern countries where there is no UK wish to take military action.There are many other well armed powers in the region that can and do take action and know the local religion, culture and languages better than us.

The questions the government needs to ask are the ones in this piece. I do not see a way for the UK military to improve the situation in Syria by bombing. The UK should be neither on the side of the Sunni nor the Shia forces in this religious war. We should remember just how difficult it has proved to create a stable peace in Libya after taking military action. We should also remember our soldiers and air crews. Their tasks should be both feasible and legal.